The Bank of England’s just-released trends in lending report offers some interesting statistics and charts, as ever.
Here’s a selection of some of the data points that caught FT Alphaville’s eye.
First, the big uh oh: The flow of net lending to UK businesses remained negative in September and lending to companies fell across all the main sectors in the third quarter. As the Bank of England noted:
The industrial breakdown of corporate lending indicates that the decline in the stock of lending in recent months has continued to be broad-based across sectors (Chart 1.2). In 2009 Q3, as in Q2, lending fell across all the main sectors of the economy, a pattern not seen previously since the series began in 1997.
And as you can see, in chart form that trend proves rather glaring:
The extent to which companies turned to the capital markets this year to compensate for an inability to gain traditional loan financing is, meanwhile, nicely reflected here:
Of course, not everyone was shut out of the new-lending window. Unfortunately, those who weren’t saw effective interest rates creep ever higher versus three-month Libor in the period, according to Bank of England:
With the BoE commenting (our emphasis):
To some extent, elevated spreads are likely to reflect heightened credit risk and a repricing of risk. But some major UK lenders have also pointed to the greater difficulty and cost in raising longer-term funding as a key factor contributing to the upward pressure on spreads. Rates on longer-term retail deposits — such as three and five-year fixed-rate income bonds — have edged higher in recent months (Chart 1.6). And while longer-term wholesale funding conditions have eased somewhat, secondary market yields on sterling senior bank debt remain high relative to three-month Libor.
Most recently, some major UK lenders indicated that an increase in competitive pressures had led to some narrowing of spreads on lending to larger businesses, with spreads on lending to smaller companies reported to have been less affected. In part, that appeared to reflect the continued attractiveness of the capital markets as an alternative means of raising finance for larger companies.
Which brings us to consumer trends. First, the flow of total net mortgage lending by all UK-resident mortgage lenders slowed to £0.9bn in September, with only lending for new house purchases recording a gradual increase.
Total net consumer credit flows, meanwhile, remained negative in September, with credit card lending declining much more quickly than the total value of transactions for UK purchases:
On unsecured lending specifically, the Bank said UK lenders expected continued weakness over coming months.
In other words, September proved banks were still as reluctant as ever to lend to corporates, homeowners and consumers alike.
Long live the credit crunch, huh?
Related links:
Mervyn King’s bank deposit slap down – FT Alphaville
How to deal with bank hoarding - FT Alphaville